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Problem 8-01A e (Essay) Rianna.com uses the allowance method of accounting for bad debts. The company produced the following aging of the accounts receivable at
Problem 8-01A e (Essay) Rianna.com uses the allowance method of accounting for bad debts. The company produced the following aging of the accounts receivable at year-end. Number of Days Outstanding Total 0-30 31-60 61-90 91-120 Over 120 Accounts receivable $377,000 $222,000 $90,000 $38,000 $15,000 $12,000 % uncollectible 1% 4% 5% 8% 10% Estimated bad debts $10,120 $2,220 $3,600 $1,900 $1,200 $1,200 Assume the unadjusted balance in Allowance for Doubtful Accounts is a $4,000 debit. (e) Assume that Rianna.com used 3% of total accounts receivable, rather than aging the accounts receivable. Comment on how your results would change. What are the advantages to the company of aging the accounts receivable rather than applying a percentage to total accounts receivable? Click if you would like to Show Work for this question: Open Show Work
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